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It seems counterintuitive to me too, but when you think about it it makes sense. If you sell burgers, the food costs are pretty high. After all, good hamburger

by dkrich 9y ago

It seems counterintuitive to me too, but when you think about it it makes sense. If you sell burgers, the food costs are pretty high. After all, good hamburger meat, cheese, and whatever else you are going to put in it is pretty expensive. If you charge your costs plus some fixed percentage to ensure profitability on every item, but your customers are used to buying burgers at similar places that charge for the food at cost and make their profits on french fries and drinks, you will quickly earn the reputation of being overpriced. If you can earn some sort of adoration that drives people to your place regardless of price, like Shake Shack or In N' Out, then you have the luxury of charging a bit more, but that's hard to achieve.

marak830 9y ago
Side note: burgers are actually quite cheap to make (even top of the line burgers: eg waygu pattie, day fresh iceberg lettuce, Roma tomatoes and a good in-house made sauce will have a cost of less than $4 unless you are screwing up your ordering), it's the incidentals that will actually cost most of the income. (I have a post lower explaining more, but basically food should never cost more than 25% of your total sales price) Adoration of customers is a nice theory. Never holds up in reality though. Those customrs go there because they know the quality and quantity for the price, and know that every time it will match that. If you have any doubt in that point, watch what happens to any chain that begins to serve lower quality or inconsistent quality food. There is customer comfort from repition, but even a moss covered stone can be moved for a good reason. Customers arnt moss covered stones though, they will try something new and if the price/quality point is better, they will move.
- dkrich 9y ago
  Customer adoration is earned through consistency and branding. Not sure we're disagreeing. If Chick fil a suddenly started selling low grade meat they would surely lose their adoration but it's also true that there isn't a years long waiting list to open a Chick fil a franchise just because they're consistent.
  - marak830 9y ago
    I do agree with you, I just want to point out that it is a lot more ficle than tech. One bad service can ruin your reputation. No one forgets a bad meal, and a whole table with bad meals is a death knell
- NaOH 9y ago
  >...food should never cost more than 25% of your total sales price) I'm in the food industry, and this pervasive food-cost mentality is one of the things I think people often do unwisely. Here's a simple example with made-up numbers: The burger ingredients are $2.50 and the burger sells for $10. There's a 25% food cost. The filet of beef tenderloin costs $10 and sells for $25. The food cost is 40%. Focusing on food cost means the burger is a better item for the restaurant. But I'd take the 40% food cost instead of the 25% food cost and then net $15 instead of $7.50. A percentage means nothing compared to cash in hand. That's nothing groundbreaking to say, but that discrepancy is often lost on food-industry people because they focus too much on the food-cost percentage.
  - marak830 9y ago
    Side note: if your paying that much for beef for a burger portion, your getting ripped off. Look the basic principle is: 25% to each: food, staff, facility, profit. Now all experienced managers know that profit is a variable. The point being, never sell for under, unless you can guarantee an over. Which is difficult to say the least. Yes, if you have gaming section and can rip off your customers from there, go ahead (nb: this is why I never working in venues with gaming facilities). If you have an amazing wine selection or just plain know your clients are going to order great pricepoint wine? Well, just be careful. Otherwise, you better be selling a lot of overpriced stock with low staffing rates, otherwise son, your going to come undone(as was put to me during training). Look, all rules are made to be broken, but there are reasons why there are general rules of thumb. At %40, how are your staff doing, with all that running. Is the service good enough? Is your kitchen overstressed? Maybe no, if so - I'm happy for you, but do you think every place can run at %40? Focusing on costs is the main thing. If you don't, you will find yourself in water deeper than you can handle one day. I'm happy that you can run at %40, I just hope it doesn't go over your head before you realise.
    - NaOH 9y ago
      I think we disagree that focusing on costs is the main thing. Figuring out what to charge is something I find easy—it's largely a one-time exercise for items—but executing on product excellence and even better service is where I put much more of my time and energy. More specifically, I simplify my employees' work down to five categories: Great products Even better customer service Safety Sanitation Organization I've set our rates so that staff can focus on those listed areas instead of sweating every cent, a common industry behavior which I think inhibits the customer experience and leads to lower-quality products. Certainly, costs matter (to me and to employees), but I want their focus to be on what they make and servicing our customers, and I'll do the bulk of the the economics. So far, for my food business as a wholesaler, that's worked.

by dkrich 9y ago

marak830 9y ago

Side note: burgers are actually quite cheap to make (even top of the line burgers: eg waygu pattie, day fresh iceberg lettuce, Roma tomatoes and a good in-house made sauce will have a cost of less than $4 unless you are screwing up your ordering), it's the incidentals that will actually cost most of the income. (I have a post lower explaining more, but basically food should never cost more than 25% of your total sales price) Adoration of customers is a nice theory. Never holds up in reality though. Those customrs go there because they know the quality and quantity for the price, and know that every time it will match that. If you have any doubt in that point, watch what happens to any chain that begins to serve lower quality or inconsistent quality food. There is customer comfort from repition, but even a moss covered stone can be moved for a good reason. Customers arnt moss covered stones though, they will try something new and if the price/quality point is better, they will move.

dkrich 9y ago
Customer adoration is earned through consistency and branding. Not sure we're disagreeing. If Chick fil a suddenly started selling low grade meat they would surely lose their adoration but it's also true that there isn't a years long waiting list to open a Chick fil a franchise just because they're consistent.
- marak830 9y ago
  I do agree with you, I just want to point out that it is a lot more ficle than tech. One bad service can ruin your reputation. No one forgets a bad meal, and a whole table with bad meals is a death knell
NaOH 9y ago
>...food should never cost more than 25% of your total sales price) I'm in the food industry, and this pervasive food-cost mentality is one of the things I think people often do unwisely. Here's a simple example with made-up numbers: The burger ingredients are $2.50 and the burger sells for $10. There's a 25% food cost. The filet of beef tenderloin costs $10 and sells for $25. The food cost is 40%. Focusing on food cost means the burger is a better item for the restaurant. But I'd take the 40% food cost instead of the 25% food cost and then net $15 instead of $7.50. A percentage means nothing compared to cash in hand. That's nothing groundbreaking to say, but that discrepancy is often lost on food-industry people because they focus too much on the food-cost percentage.
- marak830 9y ago
  Side note: if your paying that much for beef for a burger portion, your getting ripped off. Look the basic principle is: 25% to each: food, staff, facility, profit. Now all experienced managers know that profit is a variable. The point being, never sell for under, unless you can guarantee an over. Which is difficult to say the least. Yes, if you have gaming section and can rip off your customers from there, go ahead (nb: this is why I never working in venues with gaming facilities). If you have an amazing wine selection or just plain know your clients are going to order great pricepoint wine? Well, just be careful. Otherwise, you better be selling a lot of overpriced stock with low staffing rates, otherwise son, your going to come undone(as was put to me during training). Look, all rules are made to be broken, but there are reasons why there are general rules of thumb. At %40, how are your staff doing, with all that running. Is the service good enough? Is your kitchen overstressed? Maybe no, if so - I'm happy for you, but do you think every place can run at %40? Focusing on costs is the main thing. If you don't, you will find yourself in water deeper than you can handle one day. I'm happy that you can run at %40, I just hope it doesn't go over your head before you realise.
  - NaOH 9y ago
    I think we disagree that focusing on costs is the main thing. Figuring out what to charge is something I find easy—it's largely a one-time exercise for items—but executing on product excellence and even better service is where I put much more of my time and energy. More specifically, I simplify my employees' work down to five categories: Great products Even better customer service Safety Sanitation Organization I've set our rates so that staff can focus on those listed areas instead of sweating every cent, a common industry behavior which I think inhibits the customer experience and leads to lower-quality products. Certainly, costs matter (to me and to employees), but I want their focus to be on what they make and servicing our customers, and I'll do the bulk of the the economics. So far, for my food business as a wholesaler, that's worked.